OVERSEAS : Stock Prices in Tokyo Drop Sharply in Morning Session
Erratic price movements resumed on the Tokyo Stock Exchange this morning, with the Nikkei index plunging by more than 400 points in the first few minutes of trading.
Share prices have eroded steadily since the beginning of the year and registered their second-worst fall ever on Monday. Stocks fluctuated wildly Tuesday and Wednesday, although they showed signs of stabilizing above a “support level” of 28,000 points on the Nikkei 225-share average as investors shored up confidence.
But the Nikkei quickly fell through the 28,000 level again today, dropping by 449.06 points to 27,993.88 as of 9:16 a.m. After one hour of trading, the index had recovered somewhat but was still down 370.48 points to 28,072.46.
“The fall in the index was caused by rumors from various sources that some minor securities firms had gone bankrupt,” Nomura Securities analyst Yoshiro Inoue told the Associated Press.
Local news reports said more than 30 minor brokerages had been left with massive losses by speculators who were unable or unwilling to pay for their buy orders because of this year’s market plunge.
Before Japanese stocks went into their descending roller coaster ride, the Nikkei had soared to a lofty peak of 38,915.87 on Dec. 29, when the average price/earnings ratio stood at 62.4. The index was gutted by 28% by the end of trading Monday, when the Nikkei closed at 28,442.94 and the average P/E ratio on the first section of the Tokyo Stock Exchange was down to 45.1.
Analysts differ on whether the current stock decline represents a crisis-style meltdown of the Tokyo market or a healthly correction to more sustainable levels after speculation and excess cash drove prices out of line with fundamentals.
Most traders and analysts agree, however, that the atmosphere in Kabuto-cho--Japan’s Wall Street--is now one of resignation, not panic.
Various factors have contributed to the bearish mood, most notably a sense that Japanese financial authorities are ineffectual in their attempts to manage the dollar-yen exchange rate. The greenback has strengthened relentlessly against the yen in recent weeks, despite yen-buying market intervention by the Bank of Japan and pleas for international coordination in monetary policy by Finance Ministry officials.
The dollar, which traded momentarily above the 160-yen level on Monday, opened in Tokyo today at 158.32, down 0.58 yen from Wednesday’s close, and strengthened to 158.15 after one hour of trading.
Also fueling pessimism in stocks is an amorphous anxiety over trade friction with the United States. Negotiators were holding 11th-hour consultations in Washington in the Structural Impedements Initiative talks as financial markets opened in Tokyo today.
